Business Entrepreneurship PDF

BUSINESS ENTREPRENEURSHIP Dr D Muchada Contact : 0772425584 Discussion Questions 1. Why and how do people become entrepreneurs? 2. Why is entrepreneurship beneficial to an economy? 3. How can governments encourage entrepreneurship, and, with it, economic growth? Questions ▪ What social and economic factors have prompted the rise in small businesses ? Entrepreneurs ▪ Entrepreneurs are found in all industries and have different reasons for starting businesses ▪ Entrepreneurs include small business owners ▪ NB There is a difference between entrepreneurs and small business management Principles of entrepreneurship What Is Entrepreneurship? Innovation is the key word for entrepreneurship. The concept of entrepreneurship was first established in the 1700s The entrepreneur is one who is willing to bear the risk of a new venture if there is a significant chance for profit. Entrepreneurs are visionaries who pursues ideas of a new product/service Entrepreneurs identify opportunities, and their capabilities to start new products or services Although entrepreneurs can be small business owners not all business owners are entrepreneurs Entrepreneurs ▪ Small business owners have technical expertise who start a business or buy a small business and decide to stay small ▪ An example would be someone who owns a small bookstore ▪ Jeff Bezos founder of American.com also sells books ▪ Bezos is an entrepreneur who developed a new market- web based book retailing that changed the book selling world and changed retailing in general ▪ Entrepreneurs often don’t accept the status quo as opposed to small business owner Cont’d Economist Joseph Schumpeter (1883-1950) showed how the entrepreneur’s drive for innovation and improvement creates upheaval and change. Schumpeter viewed entrepreneurship as a force of “creative destruction.” The entrepreneur carries out “new combinations,” thereby helping render old industries obsolete. The creativity of entrepreneurs presents new and better ways to doing business. This renders old systems unviable or obsolete. Peter Drucker (1909-2005) described the entrepreneur as someone who actually searches for change, responds to it, and exploits change as an opportunity. Examples changes in communications – from typewriters to personal computers to the Internet – illustrates these ideas. The mobile phone revolution and Internet – rendering the fixed landline almost obsolete Cont’d Most economists today agree that entrepreneurship is a necessary ingredient for stimulating economic growth and employment opportunities in all societies. In the developing world, successful small businesses are the primary engines of job creation, income growth, and poverty reduction. Therefore, government support for entrepreneurship is a crucial strategy for economic development. As the Business and Industry Advisory Committee to the Organization for Economic Cooperation and Development (OECD) noted in 2003, “Policies to foster entrepreneurship are essential for job creation and economic growth.” Government can provide incentives that encourage entrepreneurs to take risk in attempting new ventures. Among these are laws to enforce property rights and to encourage a competitive market system. Cont’d The culture of a community may influence entrepreneurship. Different levels of entrepreneurship may stem from cultural differences that make entrepreneurship more or less rewarding personally. A community that gives status to those at the top of organizations or those with professional expertise may discourage entrepreneurship. A culture or policy that accords high status to the “self-made” individual is more likely to encourage entrepreneurship. Why Become an Entrepreneur? What leads a person to strike out on his own and start a business? Being laid off once or more times. Frustration with current job and no better career prospects. job is in jeopardy. A firm may be contemplating cutbacks that could end a job or limit career or salary prospects. Being passed over for promotion. Perhaps a person sees no opportunities in existing businesses for someone with his or her interests and skills. Some people are actually repulsed by the idea of working for someone else. They object to a system where reward is often based on seniority rather than accomplishment, or where they have to conform to a corporate culture. Disillusioned by the bureaucracy or politics involved in getting ahead in an established business or profession. Some are tired of trying to promote a product, service, or way of doing business that is outside the mainstream operations of a large company. Some people are attracted to entrepreneurship by the advantages of starting a business. These include: Entrepreneurs are their own bosses. They make the decisions. They choose whom to do business with and what work they will do. They decide what hours to work, as well as what to pay and whether to take vacations. Entrepreneurship offers a greater possibility of achieving significant financial rewards than working for someone else. It offers the prestige of being the person in charge. Greater autonomy It provides the ability to be involved in the total operation of the business, from concept to design and creation, from sales to business operations and customer response. Cont’d It gives an individual the opportunity to build equity, which can be kept, sold, or passed on to the next generation. Entrepreneurship creates an opportunity for a person to make a contribution. Most new entrepreneurs help the local economy. Steve Jobs, who co-founded Apple in 1976, and ignited the subsequent revolution in desktop computers. Strive Masiyiwa at local level. What Makes Someone an Entrepreneur? Who can become an entrepreneur? There is no one definitive profile. Successful entrepreneurs come in various ages, income levels, gender, and race. They differ in education and experience. But research indicates that most successful entrepreneurs share certain personal attributes, including: 1. creativity, 2. dedication, 3. determination, 4. flexibility, 5. leadership, 6. passion, 7. self-confidence, and 8. “smarts.” Cont’d Creativity is the spark that drives the development of new products or services, or ways to do business. It is the push for innovation and improvement. It is continuous learning, questioning, and thinking outside of prescribed formulas. Dedication is what motivates the entrepreneur to work hard, 12 hours a day or more, even seven days a week, especially in the beginning, to get the endeavor off the ground. Planning and ideas must be joined by hard work to succeed. Dedication makes it happen. Determination is the extremely strong desire to achieve success. It includes persistence and the ability to bounce back after rough times. It persuades the entrepreneur to make the 10th phone call, after nine have yielded nothing. For the true entrepreneur, money is not the motivation. Success is the motivator; money is the reward. Cont’d Flexibility is the ability to move quickly in response to changing market needs. It is being true to a dream while also being mindful of market realities. A story is told about an entrepreneur who started a fancy shop selling only French pastries. But customers wanted to buy muffins as well. Rather than risking the loss of these customers, the entrepreneur modified her vision to accommodate these needs. Leadership is the ability to create rules and to set goals. It is the capacity to follow through to see that rules are followed and goals are accomplished. Cont’d Passion is what gets entrepreneurs started and keeps them there. It gives entrepreneurs the ability to convince others to believe in their vision. It can’t substitute for planning, but it will help them to stay focused and to get others to look at their plans. Self-confidence comes from thorough planning, which reduces uncertainty and the level of risk. It also comes from expertise. Self-confidence gives the entrepreneur the ability to listen without being easily swayed or intimidated. Cont’d “Smarts” is an American term that describes common sense joined with knowledge or experience in a related business or endeavor. The former gives a person good instincts, the latter, expertise. Many people have smarts they don’t recognize. A person who successfully keeps a household on a budget has organizational and financial skills. Employment, education, and life experiences all contribute to smarts. Starting a new Business ▪ Trends in shaping entrepreneurship and small business ownership ▪ In the late 1900s starting a dot com while still in college seemed a quick route to riches ▪ Much entrepreneurial opportunity comes from major charges in demographic society and technology ▪ Evolving social and demographic trends combined with challenge of operating in a fast paced technology dominated business climate are changing the face of entrepreneurship and small business ownership ▪ Small businesses provide jobs and spur economic growth. Conditions for entrepreneurs ▪ C F Shane 2004: 6 ▪ Entrepreneurial opportunities-environmental changes, political, regulatory, social demographic etc ▪ Difference between people in their willingness and ability to act on opportunity ▪ Risk taking does demand exist, can they compete, can value chain be created ▪ Exploiting opportunities e.g licensing ▪ innovation Types of Entrepreneurs ▪ Classic Entrepreneurs- ▪ are risk takers ▪ They start companies based on innovative ideas ▪ Some classic entrepreneurs are micropreneurs- they start small and stay small ▪ Some start business for personal satisfaction and lifestyle ▪ Milo Inagi and Begels story- went to New york in 1998 with some college friends. She liked begels so much, quit her job and followed her dream of owning a Bagel shop in Tokyo. ▪ No one could talk her out of that She opened her shop and made $2300 same amount she would earn in a job. She however felt satisfied Types of Entrepreneurs ▪ Growth Oriented Enterprises ▪ Want businesses to grow into major corporation ▪ Most high tech guys are formed by growth oriented enterprises ▪ Jeff Bezos noted he could compete with large chains of traditional book retailers with Amazon.com ▪ Bezos applied his book model to other product lines, from toys and house and garden items, tools. apparel., music services ▪ Amazon is becoming the most customer centric company where people find what they may want to buy online Types of Entrepreneurs Multipreneurs ▪ Entrepreneurs who start a series of companies ▪ They thrive in building a business and how it grows ▪ Elon Musk founder and CEO of Tesla launched innovation in solar Technology and commercial space exploration with SpaceX ▪ Musk has pioneered countless innovation and has challenged traditional automobile, trucking and energy and has challenged businesses to rethink their business ▪ What type of entrepreneur is he? Types of Entrepreneurs Intrapreneurs ▪ Don’t own companies but use their creativity, vision and risk taking within a large corporation ▪ They can nature their ideas and develop new products ▪ Intrapreneurs have high degree of authority to run own mini company ▪ They share many of personal traits as classic entrepreneurs but take less personal risk Entry Strategies for New Ventures It is easy to be captivated by the promise of entrepreneurship and the lure of becoming one’s own boss. It can be difficult, however, for a prospective entrepreneur to determine what product or service to provide. Many factors need to be considered, including: 1. an idea’s market potential, 2. the competition, financial resources, and one’s skills and interests. 3. Then it is important to ask: Why would a consumer choose to buy goods or services from your firm? uniqueness of the idea and or product Cont’d Low cost alone can not be an entry strategy New ventures tend to be small. Large firms usually have the advantage of lowering costs by producing large quantities. Successful entrepreneurs often distinguish their ventures through differentiation, niche specification, and innovation. Cont’d Differentiation is an attempt to separate the new company’s product or service from that of its competitors. When differentiation is successful, the new product or service is relatively less sensitive to price fluctuations because customers value the quality that makes the product unique. A product can be functionally similar to its competitors’ product but have features that improve its operation, for example. It may be smaller, lighter, easier to use or install, etc. In 1982, Compaq Computer began competing with Apple and IBM. Its first product was a single-unit personal computer with a handle. The concept of a portable computer was new and extremely successful. Cont’d Niche specification is an attempt to provide a product or service that fulfills the needs of a specific subset of consumers. By focusing on a fairly narrow market sector, a new venture may satisfy customer needs better than larger competitors can. Changes in population characteristics may create opportunities to serve niche markets. One growing market segment in developed countries comprises people over 65 years old. Other niches include groups defined by interests or lifestyle, such as fitness enthusiasts, adventure-travel buffs, and working parents. In fact, some entrepreneurs specialize in making “homemade” dinners for working parents to heat and serve. Cont’d Innovation is perhaps the defining characteristic of entrepreneurship. Visionary business expert Peter F. Drucker explained innovation as “change that creates a new dimension of performance.” There are two main types of product innovation. Pioneering or radical innovation embodies a technological breakthrough or new-to-the-world product. Incremental innovations are modifications of existing products. Cont’d But innovation occurs in all aspects of businesses, from manufacturing processes to pricing policy. Tom Monaghan’s decision in the late 1960s to create Domino’s Pizza based on home delivery and Jeff Bezos’s decision in 1995 to launch Amazon.com as a totally online bookstore are examples of innovative distribution strategies that revolutionized the marketplace. Entrepreneurs in less-developed countries often innovate by imitating and adapting products created in developed countries. Drucker called this process “creative imitation.” Creative imitation takes place whenever the imitators understand how an innovation can be applied, used, or sold in their particular market better than the original creators do. Innovation, differentiation, and/or market specification are effective strategies to help a new venture to attract customers and start making sales. Intellectual Property: A Valuable Business Asset Intellectual property is a valuable asset for an entrepreneur. It consists of certain intellectual creations by entrepreneurs or their staffs that have commercial value and are given legal property rights. Examples of such creations are a new product and its name, a new method, a new process, a new promotional scheme, and a new design. A fence or a lock cannot protect these intangible assets. Instead, patents, copyrights, and trademarks are used to prevent competitors from benefiting from an individual’s or firm’s ideas. Cont’d Protecting intellectual property is a practical business decision. The time and money invested in perfecting an idea might be wasted if others could copy it. Competitors could charge a lower price because they did not incur the startup costs. The purpose of intellectual property law is to encourage innovation by giving creators time to profit from their new ideas and to recover development costs. Intellectual property rights can be bought, sold, licensed, or given away freely. Some businesses have made millions of dollars by licensing or selling their patents or trademarks. Every entrepreneur should be aware of intellectual property rights in order to protect these assets in a world of global markets. An intellectual property lawyer can provide information and advice. The main forms of intellectual property rights are Patents: A patent grants an inventor the right to exclude others from making, using, offering for sale, or selling an invention for a fixed period of time – in most countries, for up to 20 years. When the time period ends, the patent goes into the public domain and anyone may use it. Copyright: Copyrights protect original creative works of authors, composers, and others. In general, a copyright does not protect the idea itself, but only the form in which it appears – from sound recordings to books, computer programs, or architecture. The owner of copyrighted material has the exclusive right to reproduce the work, prepare derivative works, distribute copies of the work, or perform or display the work publicly. Cont’d Trade Secrets: Trade secrets consist of knowledge that is kept secret in order to gain an advantage in business. “Customer lists, sources of supply of scarce materials, or sources of supply with faster delivery or lower prices may be trade secrets,” explains Joseph S. Iandiorio, the founding partner of Iandiorio and Teska, an intellectual property law firm. “Certainly, secret processes, formulas, techniques, manufacturing know-how, advertising schemes, marketing programs, and business plans are all protectable.” Trade secrets are usually protected by contracts and non-disclosure agreements. No other legal form of protection exists. The most famous trade secret is the formula for Coca-Cola, which is more than 100 years old.Trade secrets are valid only if the information has not been revealed. There is no protection against discovery by fair means such as accidental disclosure, reverse engineering, or independent invention. Cont’d Trademarks: A trademark protects a symbol, word, or design, used individually or in combination, to indicate the source of goods and to distinguish them from goods produced by others. For example, Apple Computer uses a picture of an apple with a bite out of it and the symbol, which means registered trademark. A service mark similarly identifies the source of a service. Trademarks and service marks give a business the right to prevent others from using a confusingly similar mark. Cont’d In most countries, trademarks must be registered to be enforceable and renewed to remain in force. However, they can be renewed endlessly. Consumers use marks to find a specific firm’s goods that they see as particularly desirable – for example, Barbie dolls or Toyota automobiles. Unlike copyrights or patents, which expire, many business’s trademarks become more valuable over time. Small businesses ▪ These play an important role in any economy ▪ In US they represent half of US economic output ▪ They employ about half private sector workforce small businesses are defined in many ways, i.e. number of employees, total revenues, Length of time, geographic location etc ▪ Small businesses can be found in retail, services, construction, insurance, agriculture, transport ▪ They employ between 1-50 employees and in business for at least 5 years The Strengths of Small Business 1. Small businesses have flexibility to innovate, create new products, services. 2. Any entrepreneur who is contemplating a new venture should examine the strengths of small businesses as compared to large ones and make the most of those competitive advantages. 3. With careful planning, an entrepreneur can lessen the advantages of the large business vis-a-vis his operation and thereby increase his chances for success. Cont’d The strengths of large businesses are well documented. 1. They have greater financial resources than small firms and therefore can offer a full product line and invest in product development and marketing. 2. They benefit from economies of scale because they manufacture large quantities of products, resulting in lower costs and potentially lower prices. 3. Many large firms have the credibility that a well-known name provides and the support of a large organization. Think of Delta locally How can a small firm possibly compete? In general, small start-up firms have greater flexibility than larger firms and the capacity to respond promptly to industry or community developments. They are able to innovate and create new products and services more rapidly and creatively than larger companies that are mired in bureaucracy. Whether reacting to changes in fashion, demographics, or a competitor’s advertising, a small firm usually can make decisions in days – not months or years. A small firm has the ability to modify its products or services in response to unique customer needs. The average entrepreneur or manager of a small business knows his customer base far better than one in a large company. If a modification in the products or services offered – or even the business’s hours of operation – would better serve the customers, it is possible for a small firm to make changes. Customers can even have a role in product development. Cont’d Another strength comes from the involvement of highly skilled personnel in all aspects of a start-up business. In particular, start-ups benefit from having senior partners or managers working on tasks below their highest skill level. For example, when entrepreneur William J. Stolze helped start RF Communications in 1961 in Rochester, New York, three of the founders came from the huge corporation General Dynamics, where they held senior marketing and engineering positions. In the new venture, the marketing expert had the title “president” but actually worked to get orders. The senior engineers were no longer supervisors; instead, they were designing products. As Stolze said in his book Start Up, “In most start-ups that I know of, the key managers have stepped back from much more responsible positions in larger companies, and this gives the new company an immense competitive advantage.” The Importance of Government Policies Government values entrepreneurs and small businesses Entrepreneurial activity leads to economic growth and helps to reduce poverty, create a middle class, and foster stability. It is in the interest of all governments to implement policies to foster entrepreneurship and reap the benefits of its activity. Thomas A. Garrett, a senior economist with the Federal Reserve Bank of St. Louis, says that government policies can be categorized as “active” or “passive” depending on whether they involve the government in determining which types of businesses are promoted. Active policies, such as targeted tax breaks, help specific forms of businesses, while passive policies help create an environment that is friendly to entrepreneurs without regard to specific firms Tax Policy ▪ Tax Policy: Governments use taxes to raise money. But taxes increase the cost of the activity taxed, discouraging it somewhat. Therefore, policymakers need to balance the goals of raising revenue and promoting entrepreneurship. Corporate tax rate reductions, tax credits for investment or education, and tax deductions for businesses are all proven methods for encouraging business growth. ▪ Regulatory Policy: “The simpler and more expedited the regulatory process, the greater the likelihood of small business expansion,” says Steve Strauss, a lawyer and author, who specializes in entrepreneurship. Reducing the cost of compliance with government regulations is also helpful. Governments can, for example, provide one-stop service centers where entrepreneurs can find assistance and allow electronic filing and storage of forms. Access to Capital Access to Capital: Starting a business takes money. There are required procedures and fees as well as the initial costs of the new enterprise itself. Therefore, the most important activity a government can undertake is to assist potential entrepreneurs with finding money for start-ups. In the United States, the Small Business Administration (SBA) helps entrepreneurs get funds. The SBA is a federal agency whose main function is guaranteeing loans. Banks and other lenders that participate in SBA programs often relax strict loan requirements because the government has promised repayment if the borrower defaults. This policy makes many loans available for risky new businesses. Legal Protection of Property Rights: Small business can thrive where there is respect for individual property rights and a legal system to protect those rights. Without property rights, there is little incentive to create or invest. Cont’d For entrepreneurship to flourish, the law needs to protect intellectual property. If innovations are not legally protected through patents, copyrights, and trademarks, entrepreneurs are unlikely to engage in the risks necessary to invent new products or new methods. According to the World Bank report, “Doing Business 2007: How to Reform,” new technologies are adopted more quickly when courts are efficient. “The reason is that most innovations take place in new businesses- which unlike large firms do not have the clout to resolve disputes outside the courts.” Cont’d Creating a Business Culture: Governments can also show that they value private enterprise by making it easier for individuals to learn business skills and by honoring entrepreneurs and small business owners. Policy makers can: Offer financial incentives for the creation of business incubators. These usually provide new businesses with an inexpensive space in which to get started and services – such as a copier and a fax machine – which most new businesses couldn’t otherwise afford. Often business incubators are associated with colleges, and professors offer their expertise. Cont’d Enhance the status of entrepreneurs and businessmen in the society. Governments might create local or national award programs that honor entrepreneurs and call on business leaders to serve on relevant commissions or panels. Marketing is Selling Marketing is often defined as all the activities involved in the transfer of goods from the producer to the consumer, including advertising, shipping, storing, and selling. For a new business, however, marketing means selling. All the entrepreneur’s plans and strategies will fail in the absence of paying customers. How does a new business get orders? The entrepreneur should research the target market and analyze competitive products. entrepreneur Phil Holland said. In 1970, Holland founded Yum Yum Donut Shops, Inc., which grew into the largest chain of privately owned doughnut shops in the United States. He suggests analyzing competitors’ successful selling methods, pricing, and advertising. Example of Pepsi in Zimbabwe versus Delta. Cont’d For example, an entrepreneur can also develop a file of potential customers by collecting names or mailing lists from local churches, schools, and community groups or other organizations. This file can be used later for direct mailings – even for invitations to the opening of the new business. After the new firm is launched, its owners need to get information about their product or service to as many potential customers as possible – economically, efficiently, effectively, (The 3 Es) and within the constraints of a budget. The most effective salesperson in a new venture is often the head of the business. Many famous entrepreneurs, such as Bill Gates at Microsoft, have been gifted at selling their products. Cont’d Publicity is also an extremely valuable way to promote a new product or service. New firms should send press releases to media outlets. A local newspaper might publish a feature about the startup. A TV or radio station might interview its owners. This can be very effective in generating sales, and it’s free! Cont’d Advertising and promotion are essential marketing tools. Newspaper, magazine, television, and radio advertisements are effective for reaching large numbers of consumers. printing fliers, It is important to be listed in local telephone directories that group similar businesses under a single heading, such as the Yellow Pages in the United States. It is also useful to be listed on Internet search engines such as Google or Yahoo, which are used by consumers for locating local businesses. These often link to a company’s Web site, thereby communicating more information. Self-analysis of entrepreneurship readiness Entrepreneurship is crucial for having a healthy and rich economic structure characterized by high well-being levels ( Saiz-Álvarez, Coduras, & Cuervo-Arango, 2014). The most dynamic countries in the world are characterized by the quality and quantity of their entrepreneurship, especially when expansive fiscal policies are limited, consumption is reduced, and investment (both foreign and domestic) is reluctant. As a result, the labour market is negatively affected in terms of higher unemployment and poverty generation, so it will be desirable to design a tool for measuring the readiness for entrepreneurship. Cont’d According to the existing literature concerning entrepreneurship, there is a range of psychological factors rooted on entrepreneurial education (Chen et al., 2015, Jiménez et al., 2015, Oehler et al., 2015, Piperopoulos and Dimov, 2015, Rauch and Hulsink, 2015, Saeed et al., 2015), need for achievement ( Begley & Boyd, 1987) and working experience ( Moog, Werner, Houweling, & Backes-Gellner, 2015); social factors based on gender ( Bullough et al., 2015, Langevang et al., 2015, Radhakrishnan, 2015), age ( Harms et al., 2014, Hatak et al., 2015, Ouimet and Zarutskie, 2014), balanced entrepreneurial skills (Lazear, 2004), ability to interact with others (Baron, 2000) and family (Oezcan, 2011, Dunn and Holtz-Eakin, 2000); economic variables mainly grounded on corporate design, as decentralized structures are associated with opportunity realization of new business opportunities (Foss, Lyngsie, & Zahra, 2015), business strategy (Block, Kohn, Miller, & Ullrich, 2015), rurality (Ranjan, 2015), and immigration (Coduras, Saiz-Álvarez, & Cuervo-Arango, 2013). All these factors psychological, social, and economic variables interact in the desire to start a new business. Definition The readiness for entrepreneurship of individuals is defined as the confluence of a set of personal traits (or features) that distinguishes individuals with readiness for entrepreneurship as especially competent to observe and analyze their environment in such a way that they channel their high creative and productive potential, so they may deploy their capability to dare and need for self- achievement. The readiness for entrepreneurship is determined by a wide set of sociological, psychological, and business management factors. Each of these disciplines provides measurable qualitative and quantitative variables that have been linked in scientific research to entrepreneurship and in entrepreneurial personality and behavior, and that must be considered in the theoretical framework to develop a tool for measuring readiness for entrepreneurship. Cont’d It is clear that a tool to measure individual's readiness for entrepreneurship must include a wide set of items related with three essential fields: 1. personal/family-based characteristics, 2. economic/entrepreneurial background, and 3. a set of psychological traits. Cont’d The series of items begins with the individuals’ origin, as several studies (Aldrich et al., 1984, Aldrich and Waldinger, 1990, Light et al., 2004, Mancilla et al., 2010, Min and Bozorgmehr, 2000, Portes et al., 2002 & many more) have demonstrated that immigrants use to be proportionally more entrepreneurial than natives in a wide range of countries. Among these studies stands out the 2012 GEM Global Report (Xavier, Kelley, Kew, Herrington, & Vorderwülbecke, 2012) as it devoted a wide section to describe the immigrant entrepreneurial activity worldwide. Cont’d Gender. The literature gives support to a higher male participation in entrepreneurship and to some behavioral differences regarding the readiness for entrepreneurship between men and women (Bullough et al., 2015, Kelley et al., 2013 & many more). At this respect, Langevang et al. (2015) draw the notion of mixed embeddedness to explore how time-and-place specific institutional contexts influence differences in gender to decide for entrepreneurship, and they find State regulations and cultural-cognitive institutional forces as the main obstacles for women's entrepreneurial business success. Cont’d This situation is especially strong when women are poor, as social variables (mainly gender, social class, and cultural adaptation to changes) play a key role in rural ( Ranjan, 2015) and traditional societies in Third World countries ( Radhakrishnan, 2015). Age. Some empirical studies based on individual data have found an inverse U- shaped relationship between age and the decision to start a business ( Bönte, Falck, & Heblich, 2009), while other findings suggest that the age-specific likelihood of becoming an entrepreneur changes with the size of the age cohort, pointing to the existence of age-specific peer effects. The literature gives different visions about the relevance of the age and its relationship with the entrepreneurial activity depending on countries’ features, the labor market status and others but, in general it is accepted that middle aged individuals’ are more prone to start-up new ventures (Casserly, 2013), with the exception of highly developed societies where experienced and adult professionals (gray entrepreneurship) are active entrepreneurs by leaving paid employment to become self-employed ( Harms et al., 2014, Blanchflower, 2004). Cont’d Moreover, whereas gender, education, and previous entrepreneurial experience matter, as well as intuition ( Saiz-Álvarez, Cuervo-Arango, & Coduras, 2013). Hatak et al. (2015) find that leadership and having entrepreneurial parents seem to have no impact on the entrepreneurial intention of employees. Finally, and complementary to ambition (Oehler et al., 2015), age is important for new firm creation as, according to Ouimet and Zarutskie (2014), an increase in the supply of young workers is positively related to new firm creation in high-tech industries, supporting a causal link between the supply of young workers and new firm creation. Cont’d Education. Recent studies demonstrate that individuals’ educational level uses to show a negative correlation with entrepreneurship but also depending on the countries’ development stage. Necessity entrepreneurs tend to have less educational level than opportunity entrepreneurs. Wennekers, Thurik, and Reynolds (2002) explained the causes that justify these trends this way: “For the most advanced nations, improving incentive structures for business start-ups and promoting the commercial exploitation of scientific findings offer the most promising approach for public policy. Developing nations, however, may be better off pursuing the exploitation of scale economies, fostering foreign direct investment and promoting management education”. Other studies show that tertiary education has a negative effect on informal entrepreneurship, as it increases awareness of and sensitivity to the possible negative repercussions of this kind of activities (Jiménez et al., 2015). Cont’d The fifth item is about the possession of specific entrepreneurial education. GEM studies (Coduras, Levie, Kelley, SÆmundsson, & SchØtt, 2008) demonstrate a positive correlation between the possession of entrepreneurial education and training and the interest for entrepreneurship as a professional option. In this regard, perceived educational support exerts the highest influence on entrepreneurial self- efficacy, and entrepreneurial intention, and on concept, business and institutional development support (Saeed et al., 2015). Complementary to these findings, Piperopoulos and Dimov (2015) show that higher self- efficacy is associated with lower entrepreneurial intentions in the theoretically oriented courses and higher entrepreneurial intentions in the practically oriented courses. This fact is especially improved when there is a mentor co-teaching who enhances satisfaction toward the course and the learning efficacy of students (Chen et al., 2015), and when antecedents of intentions and behavior are increased (Rauch & Hulsink, 2015). Cont’d the labor experience in the readiness for entrepreneurship measurement as the literature points out that individuals with managerial experience ( Reynolds, 1997) or who are experts on concrete activity sectors (Shane, 2000) are more prone to start-up new ventures. Also, there are studies which demonstrate the relationship between early work experience and the possession of entrepreneurial spirit ( Colombatto & Melnik, 2007), and the importance of being in contact with entrepreneurial peers ( Moog et al., 2015) Cont’d Personal income. Studies performed during the eighties (Evans & Jovanovic, 1989) stated that individuals with greater assets are more likely to switch into self-employment, all else equal. This result is still consistent with the view that entrepreneurs face liquidity constraints. In principle, wealthier individuals could make better entrepreneurs or could have accumulated wealth in the prospect of starting a business. Therefore, a positive correlation between wealth and the propensity to become an entrepreneur is not definitive evidence of binding liquidity constraints. Cont’d work status. Following Kihlstrom and Laffont (1979), an individual's decision to become an entrepreneur “is the result of a maximization process in which the individual in question compares the returns from alternative income producing activities and selects the employment opportunity with the highest expected return”. Recent studies performed on GEM international individual data ( Arenius & Minniti, 2005) showed that work status was not significant as working and non-working respondents appeared as equally likely to engage in nascent entrepreneurship, but the recent economic crises have been pushing unemployed people toward taking entrepreneurship as an alternative. Thus, it is possible that the perception regarding the entrepreneurial option can have changed during the last decade being possible an increment of the readiness for entrepreneurship among unemployed, part time employees, students and/or other work status. Also the persistence of governments and media translating the necessity of increasing the entrepreneurial activity rate in most countries would have some influence in other work status categories. Cont’d habitat (rural versus urban). Some GEM studies stated some evidences that, at least in some countries, people living in rural areas are more entrepreneurial. This effect has been justified before (Dabson, 2001, Fornahl, 2003, Lafuente et al., 2007) through different arguments such as the necessity of rural zones of being provided with minimum services, the higher development of primary sector activities which are critical for urban areas, the diversity of entrepreneurial opportunities out of the big cities and others. Rural entrepreneurship is especially affected by local resilience (Steiner & Atterton, 2015) mainly affecting small-scale food-related rural firms, as this type of food-related entrepreneurship affects consumption and value creation ( Arthur & Hracs, 2015). Finally, value creation is fostered when entrepreneurship is rooted, at least partially, on technology ( Wallis, 2015). Cont’d The last variable of this group is civil status. This variable is interesting due to women's possible constraints derived of their civil status and family life depending on the age as stated in the GEM special reports on women entrepreneurship (Kelley et al., 2013). Moreover, skill-spillover between partners might be context dependent and only from men to women ( Oezcan, 2011). Once selected the items of this group, the next step consists of assigning scores to each one to quantify the contribution of personal traits to readiness for entrepreneurship. The role of entrepreneur in economic development, The entrepreneur who is a business leader looks for ideas and puts them into effect in fostering economic growth and development. Entrepreneurship is one of the most important inputs in the economic development of a country. The entrepreneur acts as a trigger head to give spark to economic activities by his entrepreneurial decisions. He plays a pivotal role not only in the development of industrial sector of a country but also in the development of farm and service sector. The major roles played by an entrepreneur in the economic development of an economy are discussed in a systematic and orderly manner as follows. Cont’d 1. Promotes Capital Formation: Entrepreneurs promote capital formation by mobilizing the idle savings of public. They employ their own as well as borrowed resources for setting up their enterprises. Such type of entrepreneurial activities leads to value addition and creation of wealth, which is very essential for the industrial and economic development of the country. 2. Creates Large-Scale Employment Opportunities: Entrepreneurs provide immediate large-scale employment to the unemployed which is a chronic problem of underdeveloped nations. With the setting up.of more and more units by entrepreneurs, both on small and large-scale numerous job opportunities are created for others. As time passes, these enterprises grow, providing direct and indirect employment opportunities to many more. In this way, entrepreneurs play an effective role in reducing the problem of unemployment in the country which in turn clears the path towards economic development of the nation. Cont’d 3. Promotes Balanced Regional Development: Entrepreneurs help to remove regional disparities through setting up of industries in less developed and backward areas. The growth of industries and business in these areas lead to a large number of public benefits like road transport, health, education, entertainment, etc. Setting up of more industries leads to more development of backward regions and thereby promotes balanced regional development. 4. Reduces Concentration of Economic Power: Economic power is the natural outcome of industrial and business activity. Industrial development normally leads to concentration of economic power in the hands of a few individuals which results in the growth of monopolies. In order to redress this problem a large number of entrepreneurs need to be developed, which will help reduce the concentration of economic power amongst the population. Cont’d 5. Wealth Creation and Distribution: It stimulates equitable redistribution of wealth and income in the interest of the country to more people and geographic areas, thus giving benefit to larger sections of the society. Entrepreneurial activities also generate more activities and give a multiplier effect in the economy. 6. Increasing Gross National Product and Per Capita Income: Entrepreneurs are always on the look out for opportunities. They explore and exploit opportunities,, encourage effective resource mobilization of capital and skill, bring in new products and services and develops markets for growth of the economy. In this way, they help increasing gross national product as well as per capita income of the people in a country. Increase in gross national product and per capita income of the people in a country, is a sign of economic growth. Cont’d 7. Improvement in the Standard of Living: Increase in the standard of living of the people is a characteristic feature of economic development of the country. Entrepreneurs play a key role in increasing the standard of living of the people by adopting latest innovations in the production of wide variety of goods and services in large scale that too at a lower cost. This enables the people to avail better quality goods at lower prices which results in the improvement of their standard of living. 8. Promotes Country’s Export Trade: Entrepreneurs help in promoting a country’s export-trade, which is an important ingredient of economic development. They produce goods and services in large scale for the purpose earning huge amount of foreign exchange from export in order to combat the import dues requirement. Hence import substitution and export promotion ensure economic independence and development. Cont’d 9. Induces Backward and Forward Linkages: Entrepreneurs like to work in an environment of change and try to maximize profits by innovation. When an enterprise is established in accordance with the changing technology, it induces backward and forward linkages which stimulate the process of economic development in the country. 10. Facilitates Overall Development: Entrepreneurs act as catalytic agent for change which results in chain reaction. Once an enterprise is established, the process of industrialization is set in motion. This unit will generate demand for various types of units required by it and there will be so many other units which require the output of this unit. This leads to overall development of an area due to increase in demand and setting up of more and more units. In this way, the entrepreneurs multiply their entrepreneurial activities, thus creating an environment of enthusiasm and conveying an impetus for overall development of the area. Legal problems in Entrepreneurship 1. Is my business compliant? Corporate compliance affects companies in all types of industries. It is important to find out what type of records and other documents should be generated and maintained by your business. The laws, which apply to your business, will vary depending on a range of different factors, such as what type of business entity you are and what region / district you do business in. As a result, it’s usually important to consult with an attorney to ensure that your company is compliant with any Zimbabwean laws that might apply to you. Cont’d 2. What business structure should I use? There are multiple business structures available and using the best structure can be critical to ensuring that your company is successful. Are you interested in having your company go public in the future or do you want to remain a private company? Are you planning on taking on investors or will you be privately funded? What type of growth do you predict your company will have in the future? The answers to all of these questions will lead to structuring your company in a variety of ways. Cont’d 3. How should I avoid legal problems with employees? Generally, every company should limit their liability as much as possible before taking on any new employees. Typically, company owners should have an employee handbook in place and ensure that all new employees sign an acknowledgement form stating that they received the handbook. The handbook should address everything from the company’s sexual harassment policy to the office dress code. Cont’d 4. Am I properly protecting my personal assets? It is always important for a company owner to keep their personal and business assets separate. The best way to do this is to maintain a separate business bank account and only pay for business-related items and expenses from your business account. This means observing the Business Entity Concept – Solomon v Solomon. In the event that a creditor sues you, they may be able to seize your company’s assets if they were purchased using your personal funds. Cont’d 5. How should I structure a partnership agreement? Many new companies fail due to the fact that there never was a well-written partnership agreement in place that spelled out the duties and obligations of each partner and covered all issues that could have arisen in the future. For instance, will the partners agree on all company decisions unanimously or by majority rules? How much equity will each partner have in the company? How will company assets be split up in the event of dissolution? All of these issues and many more must be tackled and addressed in a comprehensive partnership agreement at the outset of forming the partnership. Cont’d 6. Am I properly protecting my business name? A large amount of companies begin using a name only to find out that another company has already been using that exact same name. A company should usually do a trademark search on the web and with the USPTO to ensure that a business name is available. An attorney can help you register your name as well as a logo and assist you with protecting against anyone infringing on your intellectual property. Cont’d 7. What should I do if I get sued? In the event that your company is sued, it is ideal to try and settle a lawsuit prior to going to court. An attorney can use their negotiating skills against an adverse party and work towards settling with them and saving your company the risk of going to court and potentially losing your case. In the event that a case cannot be settled, it’s best to consult with an attorney on the best strategy for winning your case in court. Cont’d 8. Should I use a non-disclosure agreement? If your company is looking to share proprietary information with another company with the intent of potentially forming a joint venture, then it might be appropriate to have a non-disclosure agreement in place. It is important to make sure the non-disclosure agreement is very detailed and lays out exactly what proprietary information will be shared. Otherwise, you might risk losing valuable work to a competitor and cause major setbacks in making your company a success. Cont’d 9. Are oral contracts enforceable? Although it’s a common misconception, oral contracts may be enforceable. However, there are some contracts that are governed by the Statute of Frauds, which is a collection of statutes requiring certain contract to be in writing. For instance, under the Statute, which has been adopted in most states, agreements to pay another’s debt, contracts for over a certain amount of money, and contracts that last longer than a party’s life must be in writing. In general, while oral contracts may be enforced, contract law doesn’t favor oral contracts since they’re often difficult to prove. Cont’d 10. Do I need an attorney or can I do it on my own? Sometimes, you might perceive a legal problem to be small when in fact the problem can potentially impact your business in ways that only an attorney can foresee. While you can certainly read up on a particular legal issue if you have the time, it’s best to consult with an attorney who can anticipate various legal pitfalls your company might encounter. Organizational structure of Entrepreneurship Hierarchical vs flat structures Hierarchical structures are the most common and have been around the longest. This structure is somewhat flexible. It can be further classified according to specific corporate needs and a specific organizing factor. The hierarchical structure creates a traditional bureaucracy. It can lead to a degree of inflexibility and red-tape delay. Many startup founders and CEOs say this approach stifles innovation and responsiveness. The flat organizational structure seeks to address those issues. Startups and small businesses in the early stages of development often use this structure. It tends to be more suited to small, lean, and flexible companies, while large organizations usually find a flat structure unwieldy and unworkable. Cont’d One of the key characteristics of a flat structure is the relative absence of many layers of middle management. There are employees and team leaders or supervisors, but the chain of command in flat structures is quite direct and short. Within these two larger categories, there’s a lot of room for variation. Other Structures Functional structure A company with a functional organizational structure is divided into various departments or teams. These are often built around specific corporate functions, such as sales, marketing, IT, finance, and human resources. A functional organizational structure can increase efficiency and productivity. This is because all of your corporate resources — people, knowledge and skills, budget, equipment, etc. — are organized around a specific function. A disadvantage of the functional structure is that it adds layers of bureaucracy. It can slow down innovation, as many levels in the chain of command must individually approve new ideas or decisions. Cont’d 2. Divisional structures The divisional structure groups teams or departments into broader divisions. This is often done on either a geographic or product-line basis. In the product-based structure, leaders create company divisions for specific product or service lines, each with its own manager. For example, a clothing company might create separate product-based divisions for women, men, and children. Separate marketing, sales, design, and customer service teams would serve each of the three lines. In many cases, this is better for product development. Cont’d The approach can result in decreased efficiency, though. With separate design teams in each division, for example, it may become more expensive to source numerous fabrics and trims. A more unified structure might save money because you could negotiate for larger quantities of materials. Cont’d 3. Geographic structures With geographically based structures, companies create divisions based on the specific regions or countries they serve. For instance, a company may find it more economical to be located near a specific material source. This means that a geographic structure makes more practical and financial sense. A downside is that geographic divisions tend to decentralize large companies. Each separate location starts to operate independently of the others. That can lead to muddied thinking and strategy. A more united brand front might better serve the company’s needs and goals. Cont’d 4. Matrix structure The matrix structure organizes reporting relationships between employees and supervisors in a grid-like model. This differs from the direct lines of the more traditional hierarchical structure. For example, workers who share skill sets may be assigned to separate divisions or departments but work together for a specific project. The result of this arrangement is that employees may report to more than one supervisor. In visual representations of this kind of structure, these different reporting relationships are represented by solid lines (for primary supervisors) and dotted lines (for project-based, temporary supervisory roles). Cont’d This approach can become confusing and complicated. Multiple points of command can increase the possibility of conflict. Stability might create drudgery over time, but too little of it can provoke anxiety and frustration. Cont’d 5. Network structure The network organizational structure is most commonly associated with companies that either partner with other businesses or that outsource large segments of business operations to contractors and freelancers. It describes the relationship between various locations and those outside or third-party entities. Visually, it might look a lot like a functional structure. But divisions represent each independent participant in the network instead of intracompany departments. Cont’d This type of approach works best when your company relies on outsourcing or joint venture partners. The structure more accurately reflects actual workflows and processes, both on- and offsite. It’s not generally the best choice when your company uses a minimal number of freelancers or contractors, or when it completes production almost wholly in house. Cont’d Combining different structures Whether your company is in the early stages or employs thousands of people, it can be challenging to figure out your organizational chart. Early on, founders should lean toward a structure that helps the organization run smoothly. Some leaders combine elements of a flat organization and a more traditional hierarchy to meet the demands of startup life. Even if you already use a more functional structure, for example, you can integrate elements of the matrix structure regarding how teams report to supervisors. Whatever structure or structures you choose, get to know the options well and think of efficiency as well as the needs of your team members. Sources of financing for an Entrepreneur 1. FFF Like Friends, Family and Fools is known as the first source of financing, as it is used for the constitution of the company itself and occurs when an entrepreneur starts his business thanks to the help of his family and friends. 2. Government Funds They are used to generate business models and project development, that is, when it is more advanced than a simple idea. They are also used to create prototypes that help to market the product or service in the market. The main sources are funds from the Ministry of Economy. Cont’d 3. Seed capital It is a loan that provides the amount of money necessary to implement a company and finance key activities during the start and start of the project. It is delivered when the company is incorporated and has an important product, but requires money to operate or for working capital. 4. Angel investors Companies that are operating generally receive this type of contribution, because due to their high innovative content or potential development, they attract credits. Angel investors are generally independent or belong to a club, since they style networks of this type of support in companies. Cont’d 5. Venture capital Also known as Venture capital, it is used when the company has a certain level of development; It is a fund that invests larger amounts. It is a temporary contribution of third-party resources to the assets of a company to optimize its business opportunities and increase its value. In this way solutions are given to business projects, risk and returns are shared. 6. Private equity It is a fund for large companies and is used to expand the business or for internationalization. Provides capital in exchange for shares that the company grants. It also contributes with monetary resources such as contacts, best practices, administration, etc. Cont’d 7. Bank financing Companies can resort to bank financing in order to have a flow in the daily operation of the business. In addition to commercial banking, there are other financial institutions that can help you, as well as companies dedicated to financial factoring. The important thing is to compare the products and bet on the one that best suits your personal needs, since the credit must be a tailored suit. I. Advantages and Disadvantages of Being an Entrepreneur Entrepreneurship is defined as the activities required to set up a business. You are taking financial risks in this free enterprise practice in the hopes that you’ll earn a profit. Tirath Kamdar, founder and Chief Executive Officer of TrueFacet, describes the process of entrepreneurship like this: “It is important to balance strong vision with a willingness to embrace change. The ability to listen, whether it be to the opinions of customers or employees, is also integral to success. While you must have the confidence to make your own choices, it is still incredibly important not to become detached from the people whose needs you are trying to meet.” Cont’d Anyone can become an entrepreneur. It is possible to follow your dream job while still working full-time somewhere else thanks to today’s technology access. That’s why a closer examination of the advantages and disadvantages of entrepreneurship and free enterprise is prudent today. You’ll be able to understand more about who you are and what your passions are as you pursue the next career goal. List of the Advantages of Entrepreneurship and Free Enterprise 1. You have an opportunity to find genuine growth. When pursuing entrepreneurship, the only roadblocks in your way are the ones you allow to be there. If you work hard enough, have a passionate drive, and a talent or skill which solves pain points for a customer demographic, then you have the foundation of a business. There are no bosses or procedures to interfere with your pursuit of a creative idea. When you work in the world of free enterprise, your life is always your own. The amount of risk you decide to take will always be your choice to make. Cont’d 2. You get to decide which business sector to pursue. Let’s take the example of a writer who pursues entrepreneurship for this example. Writers could build their own marketing agency with sales content. They could produce blog content for several clients simultaneously. This free enterprise pursuit could ghostwrite novels, textbooks, or other published material. A writer could pursue novels or works in their own name too. They could provide technical writing skills, how-to guides, or instructions for customers to follow when assembling an item they’ve purchased. Some writers create movies or television shows, while others create product descriptions. Every career option offers varied opportunities like this, which means you can always work in an area you’re passionate about when entrepreneurship is your focus. Cont’d 3. You have more independence when working as an entrepreneur. When you’re active in the world of entrepreneurship, then you get to be your own boss. You have the freedom to make your own decisions each day. This structure makes it easier to balance your personal and professional life. You get to work when you want, how you want, and the number of hours that you want each day – to some extent, that is. Some entrepreneurs can even work from different locations. You get to direct your employees, help others earn an income, while everyone makes progress toward the goals they wish to achieve. Cont’d 4. You have an ability to earn as an entrepreneur. Employees are locked into a salary schedule when they begin working in the traditional sense. Hourly workers can earn more if they get a chance to earn overtime or holiday pay. Salaried workers don’t have that luxury at all. When you’re in the world of entrepreneurship, you dictate how much you earn. If you start a company, then you own it outright. You gain the largest share of the profits earned. That means the potential for success is unlimited if you’re willing to put in the hours. Cont’d 5. You have opportunities to pursue change in free enterprise pursuits. If you see new opportunities to make money when you’re pursuing entrepreneurship, then you have the option to take it. You always have a choice to earn more when a good idea strikes. Through networking opportunities, business contacts, and creative brainstorming sessions, you are always the author of your own destiny when working this way. If you get tired of what you’re doing, then you can shift your perspective to go explore a different path. Cont’d 6. You have access to helpful platforms which can get you started. Entrepreneurs have more tools available to them today than arguably ever before in history. If you want to fund a start-up business, crowdfunding platforms like Kickstarter and Indiegogo give you a chance to make that happen. When you want to work as a freelancer, a company like Fiverr offers you training, tools, and a sales platform which can help launch your self-employment journey. Podcasts, books, and even college classes give you a chance to learn more about your chosen career niche. If you take some time to plan your adventure into entrepreneurship, you will discover that many opportunities require little – if any – initial investment to help you take those first few steps. Cont’d 7. You have more excitement in your life. It is true that many entrepreneurs typically work longer hours than the average employee. Many work harder hours too. There’s no slacking off when you’re responsible for your livelihood. At the same time, however, there is more excitement to find in each work day. No two days are ever the same when you’re actively engaged in entrepreneurship and free enterprise pursuits. Even with an established business and a daily routine, there are always new challenges to face. That is why being an entrepreneur is such a rewarding experience on so many different levels. Cont’d 8. You get the opportunity to be first to the market. When a great idea strikes, nothing feels better as an entrepreneur when you are first to the market. That gives you the chance to have a head start in every phase of the project. The competition always lags behind when you take the lead, which means your revenues and business gains become exception. You’ll need to perform research and get your marketing messages correct first, but if the puzzle pieces fit together well, it only takes one great opportunity to earn like never before. Cont’d 9. You gain an opportunity to develop your community. Being an active entrepreneur in your community is a wonderful think. When success happens, you have new opportunities to finance good causes. Whether you sponsor a Little League team, develop new educational opportunities, or support public health, entrepreneurship gives you a chance to change the lives of everyone around you as you change too. You’ll discover that the qualities which drove you into the world of free enterprise in the first place will also create an urge to pay it forward when you see success. Cont’d 10. You get to leave the commute behind. One of the best perks that comes with a pursuit of entrepreneurship involves working from home. Depending on your industry and what you choose to pursue, it is possible to establish an office in your home. Even if you rent an apartment, digital business opportunities only require a decent computer and a strong internet connection. Numerous first-time entrepreneurs create digital opportunities for themselves thanks to a little space and some tech, giving them more time to be around their families, even when they’re working. Having a home office means you get to leave the commute and its costs behind too. According to the Citi Thank You Premier Commuter index, the average cost of an American commute is $2,600 per year and 26 minutes per day. Both issues go away if you establish a home office. Cont’d 11. You can take that vacation you’ve always wanted to have. One of the best perks about entrepreneurship are the vacations. Seriously. Here’s why. If you’re self-employed, you can take some work with you while taking the family on vacation. For the entrepreneurs who are still single, you can travel and work simultaneously. Although you don’t get the benefit of paid-time off, you can budget for a trip pretty easily once the money starts flowing into your account. There is always the possibility of working early, then relaxing the rest of the day wherever you happen to go too. List of the Disadvantages of Entrepreneurship and Free Enterprise 1. You must be a natural leader to find success in this field. Because there is no one directing your every move in the world of entrepreneurship, it is up to you to ensure the quality and quantity of work meets your income expectations. You must be a self-starter as an entrepreneur, willing to go the extra mile (or kilometer) to meet the needs of your family, yourself, your employees, and your customers. There must be a natural leadership drive present at some level to direct traffic throughout each day. You must know when to roll up your sleeves to work, but this work also requires you to know when to delegate or outsource. Cont’d 2. You won’t have flexible hours all the time. There are a handful of entrepreneurs who found success despite putting in a handful of working hours each week because their idea was so good. Most people who find success in the world of entrepreneurship are working longer, harder days than the average “traditional” employee. You do have some flexibility when putting in those hours, so you can structure medical appointments, school visits, and other family needs within your day. You do not have the luxury of cutting back on your hours most days. Gary Vaynerchuk says start-up founders should expect to work 18-hour days for at least the first year if they want to make it. Grant Cardone says that instead of working 9-to-5 workdays, he puts in 95 hours per week, which is an average of 14 hours per day. Cont’d 3. You won’t earn much in the first year (or more) of your efforts. Sokanu reports that the average yearly salary for an entrepreneur in the United States is $57,360. Some report earnings in excess of $120,000 per year. There are plenty of self-made millionaires who entered the world of entrepreneurship and found immediate success. The average person will not reach any of these figures during their first year pursuing their own definition of free enterprise. The average earnings for a first-year entrepreneur can be as low as $10,000, depending on your industry and niche. Cont’d 4. You will experience more stress than you can ever remember. There are several benefits to consider when pursuing entrepreneurship, but it all starts with a foundation of stress. You do not have a guaranteed income when working as an entrepreneur. No one is available to you within the chain of command to provide you with guidance or advice. Most entrepreneurs don’t even have colleagues around to give them support. These stressors can take an emotional toll, sometimes even creating isolation and loneliness. According to the Gallup Wellbeing Index, 45% of entrepreneurs report being stressed, compared to 42% of other workers. 34% of entrepreneurs say they worry “a lot,” compared to 30% of traditional employees. 30% of respondents to a self-employment review conducted by Julie Deane of Cambridge Satchel Company said that isolation was either a “big” problem or “something of a” problem for them. Cont’d 5. You may need to find investors to help you take those first steps. Some businesses require a lot of money to get started. Many entrepreneurs begin their adventure in the world of free enterprise in debt because they must borrow their initial start-up costs. These first investments sometimes have an enormous impact on the performance of the opportunity being pursued, which may lead to long-term debt for some people. Cont’d 6. You are always scrutinized by your customers and employees. When you pursue entrepreneurship, then the business opportunities you create are directly tied to your personal reputation. Any slip-up of service or quality reflects poorly on your company and you. If enough people feel like you’re not meeting their expectations, the poor reputation which develops from that perspective can lead to earnings loss, additional debt, and even the complete failure of your entrepreneurship pursuits. Cont’d 7. You may discover financial instability in your future. Many entrepreneurs find that their disposable income levels decrease for the first few years they pursue this adventure. Without available income, entrepreneurship can lead to a lower credit score, higher lending rates for loans, and less credit availability. Being self-employed makes it more difficult to secure a mortgage because you must prove a history of financial success for a lender. Lending products for vehicles and even smartphones become more expensive and less available. Cont’d 8. You may encounter industry backlash with some ideas. Up to 90% of consumers make their purchasing decisions from public reviews that are left on products and services. About 75% of consumers treat this information as if it were a referral from their family or a close friend. That means customers won’t try your product because there aren’t any reviews for it. Once everyone sees how good your stuff is, combined with positive reviews from early adopters, the idea will eventually take off. There is always the risk, however, that some ideas won’t take off at all, even if the people who use your products or services think they’re great. Cont’d 9. You may have encounters with the government which are not so friendly. Pursuing entrepreneurship involves a lot of administrative work which goes on behind the scenes. There may be licensing requirements, permits, and other regulations your new business venture must follow. Even if you are a one-man or one-woman show, some states in the U.S. require business licenses, sales tax collection, and business and occupation taxes as part of your sole proprietorship. If you don’t realize these issues, then penalties, fines, and even criminal charges become possible. Cont’d 10. You have days when it feels like you never leave work. There are rewards to consider if you work at home when pursuing entrepreneurship. You must also take into account that you’re never leaving work if you stay at home all the time. It always seems like you’re either on-call, checking e- mail, or following up on something to make your life a little easier. Even when you’re on vacation, there are messages that come through asking you for work or wondering why you can’t take on a project at that exact moment. Then there’s the fact that if you take a vacation, you won’t get paid like an employee would. You must budget for that trip in advance. Cont’d 11. You can fall flat on your face at any time. Some startups succeed each year, but it is a known truth that most will fail. Three out of every four venture-backed companies fail each year, according to information published by the Harvard Business School. Even after 10 years, the failure rate of companies in the U.S. is 70%. That means you can experience success year after year, then lose your focus on an economy or demographic shift and lose everything. Most entrepreneurs fall flat at least once in their lives. Many experience multiple failures. If you’re not willing to pick yourself up from the dust to keep pressing forward, then the world of free enterprise may not be right for you. Cont’d The advantages and disadvantages of entrepreneurship and free enterprise involve new paths to achieve your full potential. Instead of chasing a promotion or partnership, you get to pursue your dreams every day. Even though that experience is stressful for many and lonely for some, most entrepreneurs also say that their jobs are extremely rewarding. If you’re thinking about a change in life, then give entrepreneurship a closer look. You might like what you discover. II. Recognizing and Exploiting Opportunities Aspiring entrepreneurs can come up with ideas all day long, but not every idea is necessarily a good idea. For an idea to be worth pursuing, we must first determine whether the idea translates into an entrepreneurial opportunity. Entrepreneurial opportunity is the point at which identifiable consumer demand meets the feasibility of satisfying the requested product or service. In the field of entrepreneurship, specific criteria need to be met to move from an idea into an opportunity. It begins with developing the right mindset—a mindset where the aspiring entrepreneur sharpens their senses to consumer needs and wants, and conducts research to determine whether the idea can become a successful new venture. Cont’d In some cases, opportunities are found through a deliberate search, especially when developing new technologies. In other instances, opportunities emerge serendipitously, through chance. But in most cases, an entrepreneurial opportunity comes about from recognizing a problem and making a deliberate attempt to solve that problem. The problem may be difficult and complex, such as landing a person on Mars, or it may be a much less complicated problem such as making a less expensive and more comfortable mattress, as companies like Casper and Purple did. Theories of Opportunity In the twentieth century, economist Joseph Schumpeter, stated that entrepreneurs create value “by exploiting a new invention or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, by opening up a new source of supply of materials or a new outlet for products, by reorganizing an industry” or similar means.2 Cont’d According to Schumpeter, entrepreneurial innovation is the disruptive force that creates and sustains economic growth, though in the process, it can also destroy established companies, reshape industries, and disrupt employment. He termed this force creative destruction. Schumpeter described business processes, including the concept of downsizing, as designed to increase company efficiency. The dynamics of businesses advances the economy and improves our lifestyle, but the changes (sometimes through technology) can make other industries or products obsolete. For instance, Schumpeter provided the example of the railroad changing the way companies could ship agricultural products quickly across the country by rail and using ice “cold cars,” while at the same time, destroying the old way of life for many ranchers who wrangled cattle from one location to their intended commercial destination. Cont’d Today, we might think of the displacement of taxi drivers by ride-sharing services such as Uber and Lyft as a modern-day example of this concept. To own and operate a New York City cab, for instance, one must buy what is called a taxi medallion, which is basically the right to own and operate a cab. Drivers take out loans to buy these medallions, which cost hundreds of thousands of dollars. But now, ride-sharing services have eaten in to the taxi industry, all but destroying the value of the medallions, and the ability of taxi drivers to make the same money they were before the popular services existed. This change has left many taxi drivers in financial ruin. 3 Schumpeter argued that this cyclic destruction and creation was natural in a capitalist system, and that the entrepreneur was a prime mover of economic growth. To him, the goal was to progress, and progression starts with finding new ideas. He identified these methods for finding new business opportunities: Cont’d ▪ Develop a new market for an existing product. ▪ Find a new supply of resources that would enable the entrepreneur to produce the product for less money. ▪ Use existing technology to produce an old product in a new way. ▪ Use an existing technology to produce a new product. ▪ Finally, use new technology to produce a new product. We can understand theories of opportunity as related to supply or demand, or as approaches to innovations in the use of technology. The first situation is a demand opportunity, whereas the remaining situations are supply situations. The final three incorporate technological innovations. Supply and demand are economic terms relating to the production of goods. Cont’d ▪ Supply is the amount of a product or service produced. Demand is the consumer or user desire for the outputs, the products, or services produced. We can use the ideas from Schumpeter to identify new opportunities. Our focus is on identifying where the current or future supply and the current or future demand are not being met or are not aligned, or where technological innovation can solve a problem. ▪ More recent research has expanded on the concept of technological entrepreneurial opportunities, identifying several areas: creating new technology, utilizing technology that has not yet been exploited, identifying and adapting technology to satisfy the needs of a new market, or applying technology to create a new venture.4 Cont’d Regardless of which of Schumpeter’s paths entrepreneurs pursue, before investing time and money, the business landscape requires a thorough investigation to see whether there is an entrepreneurial opportunity. Remember, entrepreneurial opportunity is the point at which identifiable consumer demand meets the feasibility of satisfying the requested product or service. “Feasibility” in this definition includes identifying a sizable target market interested in the product or service that has sufficient profitability for the venture’s financial success. Identifying Opportunity A good place to begin your entrepreneurial quest is to read as much as you can, especially with new technology developments, even outside the field you work in. Remember that as technologies start to emerge, we often do not yet understand their commercial potential. For example, microwave technology was first applied in radars to track military submarines. But, thanks to a curious man named Percy Spencer and the accidental melting of a peanut bar in his pocket one day while tinkering with the technology, the microwave was born. It would take a few decades for it to be produced at a price the mass market could afford. SWOT ANALYSIS FOR BUSINESS SWOT analysis is a business analysis process that ensures that objectives for a project are clearly defined and that all factors related to the project are properly identified. The SWOT analysis process involves four areas: ▪ Strengths, ▪ Weaknesses, ▪ Opportunities and ▪ Threats. Both internal and external components are considered when doing SWOT Analysis, as they both have the potential to impact the success of a project or venture. Cont’d The following is a brief summary of SWOT Analysis components: 1. Strengths Strengths in SWOT analysis are the attributes within an organization that are considered to be necessary for the ultimate success of a project. Strengths are resources and capabilities that can be used for competitive advantage. Examples of strengths that are often cited include: 🢭 Strong brand names – Nike, ACCA, Bata, Delta, Coca Cola, CA, CIMA, CIS 🢭 Good reputation – Econet – through quality service as compare to NETONE 🢭 Cost advantages of proprietary know-how – ZOL , DELTA, Cont’d 2. Weaknesses The factors within the SWOT analysis formula that could prevent successful results within a project are Weaknesses. Weaknesses include factors such as an abundance of rivalry between departments, a weak internal communication system, lack of funding and an inadequate amount of materials. Weaknesses can derail a project before it even begins. Other Weaknesses include: 🢭 Weak brand name – NETONE, METROPOLITAN BANK, 🢭 Poor reputation – CITY OF HARARE and other State Owned Enterprises 🢭 Ineffective and high cost structure – CBZ branch network in the Growth Points Cont’d 3. Opportunities Opportunities are classified as external elements that might be helpful in achieving the goals set for the project. These factors could involve vendors who wish to work with the company to help achieve success, the positive perception of the company by the general public, and market conditions that could make the project desirable to the segment of the market. Additional Opportunities include: 🢭 Arrival of new technology – IT Companies 🢭 Unfulfilled customer needs – Mobile Companies 🢭 Taking business courses (training) – CPD – with Professional Bodies Cont’d 4. Threats These external factors could gravely affect the success of the project or business venture. The possible threats that are critical to any SWOT analysis include a negative public image, no ready-made market for the final product and the lack of vendors who are able to supply raw materials for the project. Some other threats include: 🢭 Trend changes – ICT developments 🢭 New regulations – ever changing regulations – example in the Banking Sector 🢭 New substitute products – Pepsi and its other drinks against Coca Cola Some discussion of SWOT Strengths and weaknesses are internal to the company (think: reputation, patents, location). You can change them over time but not without some work. Opportunities and threats are external (think: suppliers, competitors, prices)—they are out there in the market, happening whether you like it or not. You can’t change them. Existing businesses can use a SWOT analysis, at any time, to assess a changing environment and respond proactively. It is recommended conducting a strategy review meeting at least once a year that begins with a SWOT analysis. New businesses should use a SWOT analysis as a part of their planning process. There is no “one size fits all” plan for your business, and thinking about your new business in terms of its unique “SWOTs” will put you on the right track right away, and save you from a lot of headaches later on. Cont’d To get the most complete, objective results, a SWOT analysis is best conducted by a group of people with different perspectives and stakes in your company. Management, sales, customer service, and even customers can all contribute valid insight. Moreover, the SWOT analysis process is an opportunity to bring your team together and encourage their participation in and adherence to your company’s resulting strategy. A SWOT analysis is typically conducted using a four-square SWOT analysis template, but you could also just make lists for each category. Use the method that makes it easiest for you to organize and understand the results. It is recommended holding a brainstorming session to identify the factors in each of the four categories. Alternatively, you could ask team members to individually complete our free SWOT analysis template, and then meet to discuss and compile the results. As you work through each category, don’t be too concerned about elaborating at first; bullet points may be the best way to begin. Just capture the factors you believe are relevant in each of the four areas. Cont’d Once you are finished brainstorming, create a final, prioritized version of your SWOT analysis, listing the factors in each category in order of highest priority at the top to lowest priority at the bottom. Questions to ask during a SWOT analysis Strengths (internal, positive factors) Strengths describe the positive attributes, tangible and intangible, internal to your organization. They are within your control. ▪ What do you do well? ▪ What internal resources do you have? Think about the following: 🢭 Positive attributes of people, such as knowledge, background, education, credentials, network, reputation, or skills. 🢭 Tangible assets of the company, such as capital, credit, existing customers or distribution channels, patents, or technology. ▪ What advantages do you have over your competition? ▪ Do you have strong research and development capabilities? Manufacturing facilities? Weaknesses (internal, negative factors) Weaknesses are aspects of your business that detract from the value you offer or place you at a competitive disadvantage. You need to enhance these areas in order to compete with your best competitor. ▪ What factors that are within your control detract from your ability to obtain or maintain a competitive edge? ▪ What areas need improvement to accomplish your objectives or compete with your strongest competitor? ▪ What does your business lack (for example, expertise or access to skills or technology)? ▪ Does your business have limited resources? ▪ Is your business in a poor location? Opportunities (external, positive factors) Opportunities are external attractive factors that represent reasons your business is likely to prosper. ▪ What opportunities exist in your market or the environment that you can benefit from? ▪ Is the perception of your business positive? ▪ Has there been recent market growth or have there been other changes in the market the create an opportunity? ▪ Is the opportunity ongoing, or is there just a window for it? In other words, how critical is your timing? Threats (external, negative factors) Threats include external factors beyond your control that could place your strategy, or the business itself, at risk. You have no control over these, but you may benefit by having contingency plans to address them if they should occur. ▪ Who are your existing or potential competitors? ▪ What factors beyond your control could place your business at risk? ▪ Are there challenges created by an unfavorable trend or development that may lead to deteriorating revenues or profits? ▪ What situations might threaten your marketing efforts? ▪ Has there been a significant change in supplier prices or the availability of raw materials? ▪ What about shifts in consumer behavior, the economy, or government regulations that could reduce your sales? ▪ Has a new product or technology been introduced that makes your products, equipment, or services obsolete? Types of Businesses – challenges and possible solutions 1. Sole Proprietor – discussions are under the entrepreneur above. 2. Partnership 3. Private Company 4. Public Listed Company 5. State Owned Enterprise Partnership A business partnership may be one of the paths you've considered to help grow your business or to answer your current business needs. Becoming aware of the advantages and disadvantages of a business partnership is a crucial first step if you're thinking of venturing into a partnership. The following pointers might provide some useful insights into the advantages and disadvantages of a partnership. Advantages of a Partnership ▪ To do a thorough analysis of the advantages and disadvantages of a partnership, start by looking at all the possible advantages that might apply to your situation. A partnership may offer many benefits for your particular business. 1. Bridging the Gap in Expertise and Knowledge ▪ Partnering with someone can give you access to a wider range of expertise for different parts of your business. A good partner may also bring knowledge and experience you may be lacking, or complementary skills to help you grow the business. ▪ For example, you may be great at generating new ideas, but not so good at selling your ideas. You may be a technology whiz but a fish out of water when it comes to building relationships and taking care of the operations side. That's where a partner with skill and acumen can step in and fill those gaps. This may be one of your first considerations when you examine the advantages and disadvantages of a partnership. Cont’d 2. More Cash ▪ A prospective partner can bring an infusion of cash into the business. The person may also have more strategic connections than you do. This may help your company attract potential investors and raise more capital to grow your business. ▪ The right business partner may also enhance your ability to borrow money to finance the growth of the business. It helps to keep these money issues in mind as part of the criteria in evaluating a potential partner. Cont’d 3. Cost Savings ▪ Having a business partner can allow you to share the financial burden for expenses and capital expenditures needed to run the business. This could result in more substantial savings than by going it alone. 4. More Business Opportunities ▪ One of the advantages of having a business partner is sharing the labor. Having a partner may not only make you more productive, but it may afford you the ease and flexibility to pursue more business opportunities. It might even eliminate the downside of opportunity costs. ▪ Opportunity costs are potential advantages or business opportunities that you may be forced to let go while you pursue other avenues. After all, as a one- person band, you have to decide where you choose to focus your time and talents. A partner who shares in the labor may free up time to explore more opportunities that come your way. Cont’d 5. Better Work/Life Balance ▪ By sharing the labor, a partner may also lighten the load. It may allow you to take time off when needed, knowing that there's a trusted person to hold down the fort. This can have a positive impact on your personal life. 6. Moral Support ▪ Everyone needs to be able to bounce off ideas or debrief on important issues. And we may need moral support when we encounter setbacks or have to cope with work and everyday frustrations. ▪ At other times, it's simply the need to celebrate after having achieved a goal, or even the need to vent from time to time. Avenues for doing this may not be so readily available to a solopreneur or a small-business owner. Running a business on your own can be lonely. A trusted partner can be a valued business companion. Cont’d 7. New Perspective ▪ It's easy to have blind spots about the way we conduct our business. A partnership can bring in a set of new eyes that can help us spot what we may have missed. It may help us adopt a new perspective or gain a different outlook about what we do, who we deal with, what markets we pursue and even how we price our products and services. ▪ A partner can inspire us and even move us from apathy, or the status quo, to the exhilaration of exploring new possibilities. We cannot attach a price on everything and inspiration is one of these intangibles that may be priceless. Disadvantages of a Partnership ▪ In examining the advantages and disadvantages of a partnership, it's important to pay particular attention to any possible disadvantages. Let's take a look at some of the downsides of a partnership. 1. Liabilities ▪ In addition to sharing profits and assets, a partnership also entails sharing any business losses, as well as responsibility for any debts, even if they are incurred by the other partner. This can place a burden on your personal finances and assets. Basically, you may be responsible for decisions your partner makes in connection with the business. In looking at the advantages and disadvantages of a partnership, this may be one of the top issues to consider. Cont’d 2. Loss of Autonomy ▪ While you likely enjoy being in total control of your business, in a partnership, you would now share control with a partner and important decisions would be made jointly. ▪ When you start exploring the advantages and disadvantages of a partnership, ask yourself this: Are you able to compromise and relinquish certain ways of doing business, if you have to? This may require a change in mindset, which may not be easily maintained over the long haul. If you've worked on your own for a long time and are used to being independent, you may find it stressful when you can't continue to do things your own way. Cont’d 3. Emotional Issues ▪ A host of issues can surface that may make working with a partner difficult. For example, conflicts can arise from differences of opinion or from unequal effort put into the business. One partner may not pull his or her own weight. Relationships can sour. Don't discount the emotions in weighing the advantages and the disadvantages of a partnership. ▪ But you may be able to prevent emotional problems by carefully choosing who you partner with, looking for someone who shares in your vision, who has values similar to yours, who has the same work ethic and where the chemistry is right. This can go a long way towards preventing unexpected problems. Cont’d 4. Future Selling Complications ▪ As circumstances change in the future, you or your partner may wish to sell the business. This could present difficulties if one of the partners isn't interested in selling. ▪ You can deal with such an eventuality by including an exit strategy in the partnership agreement. For example, you may include "a right of first refusal" should your partner decide to sell his or her interest in the business to a third party. This ensures that you retain the right to accept the offer, thus preventing a stranger from joining the business. An exit strategy can address many other issues such as a partner's bankruptcy, disability or desire to move out of the country. Cont’d 5. Lack of Stability ▪ When balancing the advantages and disadvantages of a partnership, you also need to consider if you're able to cope with unpredictability. Even if you have a solid exit strategy in your partnership agreement, the change triggered by a partner's situation can cause instability in the business. Is riding the wave of instability one of your strengths? ▪ In analyzing some of the advantages and disadvantages of a partnership, you may conclude that the advantages outweigh the disadvantages. What's more, some of the disadvantages of a partnership may be overcome with due diligence, proper investigation and a detailed, written, business prenup. ▪ Ultimately, make sure that you're comfortable in a partner role. Ask yourself what growth goals a partnership can help you achieve that you could not do alone. What expertise can you attract in a partner that may be a competitive differentiator? ▪ Carefully evaluate all the advantages and disadvantages of a partnership in relation to your financial situation and mindset. Above all, take your time to evaluate your prospective partner to ensure that he or she is a good match. A business partnership is a marriage. And as with any long-lasting marriage, it's based on finding the right person, someone you trust, and enjoying being together within four walls. Private Company The following are the advantages 1. Liability of owners and or shareholders is limited to the unpaid portion of the shares they have subscribed to 2. Funding is more accessible than a sole proprietor / partnership 3. More expertise from different company directors / shareholders brought into the company 4. It has perpetual existence which means it is alive even after the shareholders have gone – it is a separate person being able to sue and be sued in its own right. – Solomon v Solomon Cont’d The following are the disadvantages of the Private Company 1. Funding could be limited as opposed to a Publi

Business Entrepreneurship PDF

Document Details

Tags

Related

Summary

Full Transcript

Upgrade to continue